Global business news twenty four hours a day at Bloomberg dot com, the radio, plus Lobo lap and on your radio. This is a Bloomberg Business Flash from Bloomberg World Headquarters on Katherine Cowdery. While stocks greeted them up of May with the rally, the SMP five founder gained the most in more than two weeks as banks rebounded and Amazon jumped for a second day to boost consumer shares. All ten industry groups in the SMP rose, with consumer discretionary
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Bloomberg Radio. Shares of Berkshire Hathaway hire today by about a half a percent following the weekend con fab in Omaha, Nebraska, the Convention of Capitalism, and you call it the annual Meeting of Berkshire Hathaway. Here to tell us more, Paul lawnces. He is the founder of Lance's Asset Management. Paul, always a pleasure, Thanks for being with us. Tell us about the meeting and how many meetings have How many Berkshire
Hathaway annual meetings have you attended? Hive or so pim um, And it's always it's always a wonderful opportunity to attend the woodstock for capitalists and you feel rejuvenated every time you go. All right, So to give us some of the highlights, I know that Warren Buffett's comments about Valiant Pharmaceuticals certainly made headlines. What else did you note about the meeting? Well, he still feels really really strongly about the future of America. Irregardless of who the president is.
He believes in the long term, you know, again, the long term future of America, its prospects. Despite the many challenges that we have, it's still the best system in the world. People really want to come here as opposed to going elsewhere. He still feels that Berkshire is reasonably under value. To talk a little bit about the one point two times Um stated book that he'll pay uh for the stock, which kind of puts a floor on it.
He talked about the individual operating businesses. When he gave the brief first quarter earnings, the after tax earnings, insurance was down a bit him and the cold business has really hurt the railroads as well as the low prices for natural gas. But again, you know, it was always he's always overwhelmingly positive despite the challenges, both regarding Berkshire as well as our country. Well. One of the issues that I believe was raised had to do with Berkshire
Hathaway in a sense changing its investment strategy. It used to invest in companies with high returns on capital, no or even low capital requirements. Now we're talking about massive amounts of capital. As you described railroads Burlington, Northern Santa Fe, as well as pipeline companies did did Warren Buffett address that shift? He did, phim and he specifically stated that
it's one of the challenges and problems with prosperity. When they were buying Sees candy in nineteen seventy two with enormous returns on capital, very small business, small investment, there simply aren't Sees candies, or if there are mars, let's say there aren't that many. And so they've decided to look for big businesses, many of which are capital intensive, like Burlington Northern, and I wouldn't be surprised him to see him do something else in the industrial space. Um,
it uses up some of their capital. It's a good productive use of capital. But you're never going to get the returns on equity in these much larger enterprises that you're going to get in the small enterprises. So it's a problem with the prosperity and the success that they've had. Now. He also mentioned something to do with derivatives as a
potential time bomb sitting on the balance sheets of many banks. Uh. Now, he believes that holding the shares of obviously a bank such as Bank of America is a good thing, but um, is there anything in your mind that caused him to talk about derivatives. Complex derivatives. Well, that comes up a lot to him because he he spoke about them years
ago as weapons of mass destruction. And I believe when they had purchased jen Rey, they took I don't recall exactly, but it might have been him four million plus in losses as they were running off the derivatives, if you will, of jen Ry. And so he's he's just concerned. He talked about the collateral that to put up with the derivatives, and I just think there's unknown there's things about the derivatives and the contracts that are just unknown, and that
that's a cause for concern for him. But having said that, he seemed to be fine with Bank of America UM, which you know have some as well. Now Berkshire Hathaway. It's a three day meeting in Omaha, tens of thousands of shareholders and it was streamed on the internet for the first for the first time. It also featured a five kilometer invest in yourself run. What was that about?
But he um he started to run a couple of years ago, several years ago, and theyon Brooks running shoes and UM and so I think it's just a it's just a fun time and a fun event. Unfortunately, pim it rained and it was pretty cool and damp out there. Um last year was terrific. That wasn't the case. But he UM, you know, at the end of the day, he tries to make it a really enjoyable time. And part of the reason he dreamed it, um, you know, he wanted it to be available, um for people that
can't make it, as opposed to those who can. But most of the people who go, they go for the annual and they go for his wisdom and Charlie's wisdom, but they also go because of the friendships and the relationships they've built over two and three and four decades. Well, the five year old warm Buffett, he spoke about his Coca Cola investment. He said he's about one quarter Coca Cola, meaning his body. Yeah, he said he's twenty or so exactly p him. I think he drinks five cokes a day.
Charlie prefers diet coke. And I think what I would say him in my own words, just if you do things in moderation, UM, I just don't think you really have to worry about doing things in excess is really the problem. Is there any thought in your mind that there will be a dividend declared at Berkshire Hathaway. I think that's highly, highly unlikely. UM as long as Mr Buffett and Mr Munger are running Berkshire Hathaway, there's too
many opportunities that they're looking for. There's always the possibility, tim you could have a decline in the stock market or with geopit political issues, and they always want to have a minimum of twenty billion in cash. They did use up a bunch with Precision Cast Parts thirty two billion that they spent in cash. Thank you very much. Paul lawn says he's the founder of Launce's Asset Management.
Talking about Berkshire Hathaway and a note. American International group The Ensure hosted first quarter net loss of sixteen cents a share. You're listening to taking stock on Bloomberg Radio. Yeah. Coming up on Bloomberg Radio, We've got Bloomberg Law, the latest in legal issues. This is Bloomberg Radio.